The Fed Is Growing the US Money Supply, So What?

As speculation grows surrounding the upcoming September 13th 2012 Fed meeting and whether or not there will be another round of quantitative easing to boost the economy, it is interesting to stop for a moment and examine how the M1 money supply has evolved over the past 30 years.

This chart provided by the St. Louis Fed gives a good glimpse at how the M1 money supply has evolved in the recent decades. It simply shows the money stock at the end of each month since August 20th 1982 in billions of dollars.

As they say, a picture is worth a thousand words and I thought it would be interesting to have a visual representation of how far we have come since the 2007 financial crisis. The last two rounds of quantitative easing have almost doubled the M1 money supply in as little as 4 years. One only has to wonder what will be the long term effect of going from 1.4 trillion to 2.4 trillion USD on the dollar. Even if it is currently the world reserve currency, it is obvious the US Dollar is bound loose value in the coming years. How is your portfolio positioned assuming such a scenario? Soon enough the world will notice that they are getting less and less value for their US Dallar holdings. Food for tought....

The Egypt Crisis Play: Transglobe Energy Corporation (TGA)

Here is an interesting article about how value investors can benefit from technical analysis. Even if it has not been that publicized today, the political crisis that was happening in the past days over in Egypt proved to be very beneficial for investors who were able to fairly assess the level of potential danger arising from this situation..

There seems to have been some situations that offer great opportunities to investors. The case of TransGlobe Energy Corporation (NASDAQ: TGA, TSE: TGL) sheds some light on events of this king. This Canadian company conducts oil well drilling operations in the Arab Republic of Egypt and in the Republic of Yemen, solely or in partnership with local companies.

Those two regions were recently affected by an uprising of the population to the political regimen in place. This proved to be a great buying opportunity for those who could take advantage of it. In the days before the unfolding of the situation in Tunisia and in Egypt, many investors in the company showed little faith in it's future prospects. This fact can clearly be concluded from the declining stock price fo TransGlobe energy Partners before January 31st 2011 that went from over 20$ a share in December 2010 to a mere 12.25 just two months later.

As the company showed in a recent update of their operations, it seems that people were too pessimistic about the outcome of the situation in Egypt and the repercussions it would have on the company:

To date, the Company's West Gharib production operations have not been affected by the recent political demonstrations in Egypt. The Company continues to the monitor the situation and has daily communication with our Cairo staff and our Joint Venture operating company. All employees are safe and accounted for. The Company will take all steps to adapt to the situation and will attempt to mitigate any adverse consequences.

 Moreover, the recent turmoil in the Middle-East is such of insignificant effect that the company's production has actually increased over the month of January. 

For my part, I purchased shares of the company on February 1st 2011 on market open for an average price of 12.13$ per share and my oversold thesis has been clearly validated. I am only left to see if there will be any upside left since the stock of TransGlobe Energy Corporation is getting very close to it's target value of 16$ per share.

Disclosure: The author is Long TGA